Max - First, thanks - I appreciate your clarifying exactly what you meant, as well as the evenhandedness and openness of your posts (all of the ones through 11:00 pm tonight, not just this one) . I agree that ASTN is not without its enigma, and that ATG's relationships with 1st United and the PHLX (combined) present the most negative facts that have been raised about this company, at least to this point. I think it is unrealistic and plainly wrong to believe that every decision ATG has made has been a perfect one, and First United and the PHLX are open to huge criticism. I do not buy "crim stock genesis" as AG put it, but that's another issue. But as you point out, they collectively may have represented the only then available alternative to get ATG to market, which, as it turns out (and contrary to the predictions of many who pointed to First United and the PHLX as THE 2 most central facts about ATG in SI, Yahoo and other places) is going to happen with the blessing of the SEC. And each of those original decisions is, at this point, nearly irrelevent.
First United has been gone for over a year. You are right that they were fast talking, boiler room NY/NJ sleazeball brokers. My first trade with them was New World Communications, which I had happened to read about a few days before the broker called (he had tried several times previously without success). Given the coincidence, I bought 1,000 shares and it made me about a 20-25% return in a matter of weeks, so I gave the broker a second hit into ATG at 14.25 in the spring of 1996. It was down to 8 within weeks as the PHLX/Casella mess unfolded in the NY Times. But at the end of that mess, ATG was specifically cleared of any wrongdoing, and the SEC allowed the process to go forward , resulting in a one year delay, which crushed the stock down to 4 and less. I bought more, but not that much more. I truthfully understood the company very little at the point of my first investment, only a little more at the point I was averaging down from 14 to 4, but nowhere near as well as I did during the course of 1998 or as I understand it today (or at least I think I do).
When the second SEC delay kicked in (December 1998), the situation was different. A staff approved version of Rule 237 had been pubished in the Federal Register, 90 days had passed, approval seemed to be imminent, but then the SEC became preoccupied with regulating ECNs and ATS systems through an omnibus rule (Reg ATS) which took a year to accomplish, and more delay kicked in. This crushed the stock down to 1-2 for a good part of 1998. Again I bought more, but not the bulk of my present position in the stock.
When the $18 Million in equity capital was raised (Spring - Summer 1998), I became a lot more bullish. Investors performing more due diligence than you, I and everybody else on this Board are capable of, agreed to fund $18 million in equity to ATG. AG decries this as a floorless dilution situation, but he is dead wrong -- in truth, it was THE event that prevented the company from suffering insolvency, and the equity paid for it was well worth it (70% of $5-10 Billion is worth a lot more than 100% of zero). And the grant of employee stock options was also critical to ATG's success because it kept critical, KEY people on hand). Westergaard pointed out that Instinet had similarly used equity capitalizations with dilutive aspects to make the move from a $5 Million company to a $150 Million company sold to Reuters. So Auric's death spiral is really the air this company breathed for a year where delay would have killed most small development stage companies. (Side Bar: Contrary to AG's complete BS, Fred Rittereiser was not just "along for the ride" - Fred ran the company from the bottom up, while Bill Lupien ran it from the top down (or up). That may be why Lupien's Optimark has very high profile financial backers but a system that has lousy volumes and has been a big disappointment to everybody who has written about it so far.)
In December of 1998, Reg ATS was published with a 4/21 effective date. I knew at that point that, barring catastrophe, VTS would get to market, which is the only reason I ever invested in ATG in the first place (the idea of a VWAP based electronic exchange system where encrypted anonymity allows institutions to avoid front-running is so intuitively obvious that, frankly, I think it will print money, because institutions will love it - my opinion only). Then in March, the SEC finally approves Rule 237 and the stock is up over 700% since. So ATG has missed deadlines, or at least they did in conjunction with PHLX (who was at least equally responsible for the delay in achieving the SEC approval), but now they are there and the only issues are starting out with liquidity and achieving technical requirements for systems operation -- e.g., not crashing. And every indication from the company is that all testing has been an unqualified success, and that there will be no delay in system launch (this includes public statements, e-mails sent in response to shareholder inquiries, etc.).
Now, where are we: The fact that the PHLX is a second rate exchange almost no longer matters because of the electronic nature of the technology, and because of Reg ATS. PHLX is just a royalty they have to pay to be affiliated with an exchange, which is a huge benefit to any ATS system. God forbid PHLX merges with the NYSE, this thing will immediately become so huge and credible that it is frankly mindblowing (IMO). But even if they don't, PHLX exchange status (or NextExchange for-profit-exchange status, once achieved) will allow ATG to introduce several other trading systems which have been in development for 2 years, systems which nobody is even paying atttention to at this point.
And instead of launching in a fuzzy cloud of inattention, they will be launching VTS at the very moment that ECNs, ATSs, stocktrading and institutional trading are in the middle of the hottest hot seat in town. Timing was their enemy for 2 3/4 years -- now all of a sudden, timing has never seemed better or more "impact" laden for a VTS launch than today.
So what has ATG done? Instead of touring the country touting what a great system they have (like Bill Lupien has for Optimark, though the volumes reported to date must objectively be called disappointing), they have been quietly signing up customers, lining up liquidity, doing no pumping from the inside (I guess they have me to do that, huh?), gearing up for launch, preparing an application for SEC licensing of NextExchange, financing the growth and possible IPO of Gomez Advisors (which was not even a glimmer in Rittereiser's eye when ATG went public in May 1996), and on and on and on. Rittereiser is running the company from the bottom up. No fancy speeches, just watching pitches, and waiting to swing at good ones. July 1 is between 4 and 5 weeks away. After that, the system gets to do the talking. We all get to sit back and watch. And it will ramp up, because all 300 issues will not be traded on day 1. But ramp up it will, and by 12/31/99, we will know a lot more about who is right and who is wrong in this debate between the longs and the shorts re ATG.
And you are right - not one word I write (or AG) will affect the ultimate outcome - it might influence potential investors, which is valuable for them potentially, but ultimately each person must make their own decisions and do their own diligence.
I respect your uncertainty and can even appreciate your "short" leanings, because it does seem a little too good to be true, and it is such a small company with ambiguous beginnings. All I can tell you is that it is very dangerous to bet against a trend this strong - if you are leaning short, you may be better off staying on the sidelines. And that you should be looking forward more than behind on this one. The very ground upon which securities trading is based is literally shifting under our feet. To his credit, Fred Rittereiser recognized this movement and created a company intended to capture some market share within it 5 years ago (with UTTC). You ought to consider whether to credit that forward thinking more than you do the choice ATG's board made to hire First United to bring them public in 1996, especially as ATG launches their premier ATS trading system after all the adversity they have been through.
Sorry for the long response. And I appreciate the comments you made, I really do.
MST |
